Get a Bigger Share of Hospital Home Care Referrals

Filed under Articles
Originally published in Market Research Letter: July/August 2008

What is your agency’s market share of the Medicare home care referrals from key hospitals servicing your geographic area? Because Medicare referrals are typically the biggest profit center for home health providers, knowing the answer to this question will tell you:

  • Where you stand in the market in comparison to your competitors.
  • Whether there is opportunity for business growth at individual hospital accounts.

In this article, we detail a step-by-step process of how to calculate your agency’s current market share of Medicare home care referrals for individual hospital accounts in your service area, plus the potential number of referrals you could be getting. We also provide a free download to help you calculate your agency’s Medicare home care referral market share.

Steps for Calculating Your Market Share of Medicare Home Care Referrals
To help you determine whether there’s opportunity for your agency to get additional Medicare home health referrals, we present the following step-by-step example. Let’s say an agency’s service area includes three hospitals. The agency must find out what portion of the total referrals they currently get from each hospital to best evaluate their potential for increasing market share and to develop an effective account strategy. To do this, an agency must begin by looking at the referral patterns of each hospital account individually.

1. Determine the total number of annual discharges of each key hospital that serves your geographic region.
You can find the number of discharges per hospital per year in Healthcare Market Resources Medicare Hospital Discharges by DRG Report. In this example, we find that one of the hospitals (Hospital A) made a total of 10,000 Medicare discharges per year.

2. Calculate each hospital’s percentage of discharges for patients who reside in your agency’s service area.
Since patients may travel to a hospital for medical care from multiple counties or states, you now need to calculate the percentage of discharges going to your service area. You do this by:

  • Identifying the zip codes or counties your agency serves.
  • Running a Healthcare Market Resources Medicare Hospital Discharges by Zip Code Report for the geography you identified. Individual hospitals are listed separately in this report, so you can see the number of discharges from each of the key hospitals.
  • Calculating the percentage of hospital discharges in your service area.

For example: Hospital A in this example makes 1,000 discharges in the agency’s service area from a total of 10,000 discharges.
1,000/10,000 = 10%
Thus, 10% of the total discharges from this hospital are patients who reside in this agency’s service area.

3. Determine the total number of Medicare home care referrals each key hospital makes to your service area annually.
This number can be determined by running a Healthcare Market Resources Medicare Home Care Discharges by DRG Report for the hospitals. Since this report provides each hospital’s total number of home health referrals – assuming the percentage of referrals going to your service area is the same percentage as their total discharges – you need to multiply the number of home care referrals by the percentage you calculated in Step 2 to find the home care referrals for your agency’s service area.

For example: The total number of Medicare home care referrals made by Hospital A in this example is 2,000. And 10% of the total discharges of Hospital A are patients in this agency’s service area.
2,000 x 10% = 200
Thus, the total number of Medicare referrals in this service area by Hospital A is 200.

4. Calculate your agency’s market share of Medicare home care referrals of each key hospital.
To do this calculation, you need to review internal records to determine the number of referrals your agency received from each hospital. Next, divide this number into the total number of Medicare home care referrals made by each of the key hospitals in your service area.

For example: This agency gets 48 referrals annually out of the 200 total Medicare home care referrals made by Hospital A.
48/200 = 24%
Thus, this agency’s market share of Medicare home care referrals is 24% for Hospital A.

What Can You Do Once You Know Your Referral Market Share?
Once you’ve determined your agency’s market share of Medicare home care referrals for the key hospitals in your service area, you can use this information to evaluate your potential for growth at individual hospital accounts:

  • If your market share is 80% at one hospital, for instance, you have captured the majority of the available market and need to look at how to grow overall referrals to home care versus other settings. (We’ll talk about this in the November/December issue of this newsletter.)
  • If your market share is closer to 24% as in the above example with Hospital A – and there is no captive agency associated with the hospital – your agency has significant growth potential.

In this case, you could potentially double your business to 50% of the Medicare referrals. But how can this best be done? First, take a look at who your competition is. Next, determine the incentives you could provide to encourage the hospital to refer Medicare home care patients to your agency. By knowing your market share of Medicare home care referrals at each key hospital account, your agency can now establish a specific marketing objective and focus on developing the appropriate sales strategy and tactics.

For example, since the Healthcare Market Resources Medicare Hospital Discharges by DRG Report is organized by clinical area, you could take a similar approach and calculate your market share at the discharge planner level. Then you would know on which specific individuals to focus your marketing efforts.

We hope this article has helped you understand how to calculate your agency’s market share of Medicare home care referrals, as well as why it is such an important metric. Click here or give us a call at 215-657-7373 for more information about how Healthcare Market Resources Inc.’s in-depth, local market data – Home Health Market Profiles and Market Development Reports – can be used to help determine your agency’s market share of Medicare home care referrals.